India’s retail inflation is expected to have eased to 5.53% in November, a welcome dip from the 14-month high of 6.21% recorded in October, according to a Reuters poll. This decline is largely attributed to the moderation of vegetable prices, which had soared earlier due to a combination of seasonal shortages and supply chain disruptions. The latest data, set for release on December 12, could provide relief to households across the country, especially given that food prices continue to consume a significant portion of consumer budgets.
In October, inflation surged mainly due to sharp increases in vegetable prices, which saw their fastest rise in nearly four years. Additionally, the imposition of an import duty on edible oils in September contributed to mounting price pressures. However, with the arrival of fresh crops and improved supply, the situation has started to stabilize.
Rahul Bajoria, the head of India and ASEAN economic research at BofA Securities, noted that “vegetable prices are showing first signs of moderation, and edible oil prices are also stabilizing.” This shift is expected to ease inflationary pressures, at least in the short term.
Core inflation, which excludes volatile categories like food and energy, is predicted to remain stable at 3.70% for November. This indicates that while food inflation is a concern, other sectors are not experiencing significant price increases. Economists suggest that factors such as lower farm input costs and easing food demand will likely bring food inflation down over the coming months.
Despite concerns over rising food prices, the Reserve Bank of India (RBI) has kept interest rates unchanged, as anticipated. The RBI recently downgraded its economic growth forecast for the fiscal year to 6.6% from 7.2%, citing slowdowns in several key sectors. At the same time, the central bank raised its inflation projection for the year to 4.8%, up from the previous estimate of 4.5%.
The trend toward lower inflation is expected to continue, with economists predicting that food inflation could ease further in the months ahead. The harvest of new crops, combined with easing pressures from farm input costs and per capita income growth, is expected to act as a dampener on prices in the medium term.
Key Data to Watch:
- Retail Inflation: Forecast to ease to 5.53% in November, down from 6.21% in October.
- Core Inflation: Likely to remain steady at 3.70%.
- Wholesale Price Index (WPI) Inflation: Expected to drop to 2.20% in November, down from 2.36% in October.
For consumers, the potential drop in inflation could offer some relief after months of rising food prices. However, while vegetable prices seem to be stabilizing, the broader picture remains mixed, with concerns about core inflation and its impact on domestic demand still prevalent. As India navigates these challenges, the RBI’s actions will be crucial in shaping the future trajectory of inflation and economic growth.
